Campari prepares portfolio rationalisation

The market continued to climb for Davide Campari , which in the first nine months totalled sales of EUR2.277bn (with organic growth in the first nine months down to 2.1%, down 1.4% in the latest period) and saw its ability to generate value diluted, with adjusted Ebitda of EUR590.7m, down 2% organically and 14% in the third quarter. The group expects to end the year with low single-digit growth in net sales and an organic adjusted Ebit performance negatively impacted by an unfavourable sales mix and a failure to absorb fixed costs due to lower production volumes. A portfolio rationalisation plan is planned, with the sale of some minor brands, and a cost containment programme. The Group is also launching a new EUR 40 million buyback plan. The search for a new CEO continues: the group expects to be able to successfully conclude this process by the first half of next year.

The nine-month net sales performance,' the company explained, 'was impacted by a combination of concomitant factors, notably macroeconomic weakness, bad weather, pressure on disposable income due to inflation, and reduced consumer and retailer confidence, peaking in the third quarter, despite outperforming the industry in key brand-market combinations. Profitability performance,' the group added in a note, 'was also impacted by continued planned infrastructure investments in a challenging market environment.

Group sales grew by 3.4% overall over the nine months, with an external growth effect of +2.1% (€46.5m), mainly driven by the integration of the newly acquired Courvoisier, while the exchange rate effect was negative 0.8%. Adjusted EBIT was 499.4 million, down 4.2% organically (-18.2% in Q3) and 4.1% overall, with a margin of 21.9%. Adjusted EBITDA decreased by 1.8% overall, with a margin of 25.9%. Group profit before tax was EUR 423 million, down 5% overall (-20.4% in Q3).

In the medium term, the group aims at an operating model based on four newly created House of Brands, which will interact with the three existing regions. In addition to the already created House of Cognac&Champagne, the new model will include the House of Aperitif, House of Whiskey and Rum and House of Tequila. Another organisational intervention will concern the rationalisation of the portfolio, with the aim of divesting non-strategic brands. "The combination of these two initiatives, together with a cost containment programme that leverages the new operating model, which includes optimisation of resource allocation, simplification and revision of end-to-end processes, and also investments in technology, including next-generation planning processes and enhanced business analysis, will enable the Campari Group to achieve greater structural cost efficiencies," the company explains. The programme is expected to generate a total benefit of 200 basis points in terms of structural costs as a percentage of net sales over the next three years by 2027, with a corresponding increase in operating margin'.